When casinos roll into the red
Restructuring Gateway Casinos and Entertainment wiped out $1 billion in debt and provided the company with a $100 million capital infusion and a $500 million loan
By Glen Korstrom, Business in Vancouver magazine, April 5-11, 2011; issue 1119
Activists who oppose Paragon Gaming Inc.’s proposal to build Western Canada’s largest casino adjacent to BC Place frequently say their opposition stems from fear that the venture will collapse in debt.
They justify these fears by pointing to a jackpot of casino companies that have run into debt so deep massive restructuring was required. One of those deals was the largest acquisition of 2010 that did not involve a mining company.
As for Las Vegas-based Paragon, it has an option to lease taxpayer-owned land, subject to civic approval and $350 million in financing, so it can build a $450 million casino and hotel complex by 2013.
Its $6 million annual lease payments would help BC Pavilion Corp. (PavCo) pay for the $563 million renovation of BC Place.
Paragon president Scott Menke has refused to open his private company’s books to demonstrate fiscal strength. PavCo chairman David Podmore, however, told Business in Vancouver that he has seen Paragon’s books and that he believes the company is capable of meeting financial commitments.
Things don’t always work out so well for casino operators, however.
The largest non-mining acquisition of 2010 demonstrated that.
Burnaby’s Gateway Casinos and Entertainment Ltd. morphed from being an income fund in 2007 to being owned by two shareholders: Crown and Macquarie Bank.